Article 1 of 8
Economy
Customer Satisfaction:
Survey Finds Satisfaction
Rises for Nondurables
---
Corporate America Still
Has
Some Distance to Travel
To Garner Highest Marks
By Calmetta Y. Coleman
11/22/1999
The
Wall Street Journal
Page A2
(Copyright (c) 1999, Dow
Jones & Company, Inc.)
This year's continuing spending spree shows that a robust
economy sends consumers to the malls. But just because people
are spending at record levels doesn't mean they're happy with
all the goods they're getting. American consumers, after all,
are known for high expectations.
But at least some products appear to be rising in the view
of consumers. The latest results of the American
Customer Satisfaction Index suggest
that consumers are more pleased with most nondurable items,
such as packaged foods, soft drinks and apparel, than they
were a year ago.
The ACSI is based on a quarterly survey conducted by the
National Quality Research Center at the University of Michigan
Business School in partnership with Arthur Andersen and the
American Society for Quality. The index, which is scheduled
for release today, shows that satisfaction with nondurable
products rose 1.5% in the third quarter to 80, out of a
possible score of 100.
Still, corporate America appears to have a way to go to win
high praise from demanding consumers. The broader index, which
measures products in all categories, suggests that overall
customer satisfaction has barely changed from a year ago,
inching up to 72.1 from 72. And since 1994, the first year of
the ACSI, satisfaction has fallen 2.8% from 74.2.
Even as American shoppers become increasingly finicky,
keepers of the index say the longer-term drop in satisfaction
can't be blamed on a rise in consumer expectations. According
to the survey, expectations have risen by less than 1% since
1994, while customer service and product quality have fallen.
The goal of the ACSI is to show that the quality of
economic output is as important as the productivity of
economic resources. If consumers are displeased with the
products being offered, they will stop buying them. And that
could hurt the financial fortunes not only of individual
companies, but of the overall economy, says Claes Fornell,
director of the research center.
"The whole point of a market economy is for companies to
compete for customer satisfaction. If the market works
properly, it would penalize companies that fail to do this and
reward ones that succeed," says Mr. Fornell, noting that
several companies that have fared well on the index, including
Hershey Foods Corp. and Coca-Cola Co., have also enjoyed
strong financial performance.
Not everybody agrees with that simple view. Some economists
see measures such as customer satisfaction and even consumer
confidence as only soft indicators, at best, of the
performance of the overall economy. "They don't tell us
anything about where the economy is going," says Diane Swonk,
chief economist at Banc One Corp. Ms. Swonk notes that
consumers' opinions of companies are influenced by immediate
external factors, such as negative news about a particular
business, that don't necessarily result in decreased spending.
But supporters of the index note that companies are
increasingly seeking to learn more about what people want and
need. One example of this is companies using e-mail and the
Internet to connect directly with consumers. "When a company
sees increases in its customer satisfaction, it is a good sign
that their product offerings are in alignment with current
consumer tastes and trends," says Joseph O'Leary, a partner at
Arthur Andersen.
The research center surveys 50,000 customers each year and
covers 175 companies across three industries and five
government agencies. It updates a portion of the database each
quarter.
The nondurable-goods industry, which is always updated in
the third quarter, typically has had higher satisfaction
scores than other industries. The research center said that's
because it's easier to switch from, say, one toothpaste brand
to another than to change television models. So makers of
short-term-use products must react quickly to changing
customer needs. Rising customer satisfaction in the industry
likely indicates that competition has resulted in better
product choices.
That said, one surprising result of the latest survey was
an increase in customer satisfaction with cigarettes and other
tobacco products. Even amid rising cigarette prices, the
category saw its first increase since 1995, up 1.3%. The
entire rise came from R.J. Reynolds Tobacco Co., a unit of RJR
Nabisco Holdings Corp., whose brands include Winston, Camel,
Salem and Doral. Philip Morris Cos., maker of Marlboros, held
steady. Both companies have invested heavily in promotions as
they fight for share in a shrinking market. Nabisco had no
immediate comment on the survey results.
Of the eight product categories measured in the latest
quarter, only two saw a decrease in customer satisfaction:
beer and personal-care and cleaning products.
Beer had a steeper overall decline of 3.7%, with the
deepest dip for Adolph Coors Co., which fell 7.1% in customer
satisfaction. But those results don't square with Coors's own
feedback from consumers, according to spokesman Kevin
Caulfield.
Coors says customer complaints are down 12% from a year
ago, and sales during the third quarter rose 8.9% to $544
million. Still, Mr. Caulfield says, the company pays heed to
any survey that measures customer satisfaction. "We certainly
don't take it lightly," he says.
Anheuser-Busch Cos., which also saw a drop, declined to
comment on the survey.
The personal-care and cleaning category, which includes
powerhouse brands from the likes of Procter & Gamble Co.
and Colgate-Palmolive Co., fell 1.2% to 81. While changes of
less than 2% for an individual company are insignificant, Mr.
Fornell says, a 1% shift for a category could signal that
quality is suffering across the board. Personal-care and
cleaning products had previously seen a dip in 1996, when it
fell from 84 to 80, but for the past two years it had held
steady at 82.
While most companies in the index declined to comment on
their downward shift, Procter & Gamble, which fell 2.4%,
said it was still pleased with its relatively high score of
81. "We believe that consumers are voting in favor of our
products every day in the marketplace," says Simon Denegri, a
spokesperson.
Clorox Co., whose products include long-established names
Pine-Sol, 409 and Soft Scrub, says it lately has gotten more
praises from customers than complaints. "Our own internal
measures don't seem to correspond with a shift downward in
consumer satisfaction," says spokesman Gil Roeder. "In fact,
we see an opposite trend." Colgate-Palmolive and Dial Corp.,
which both saw their scores fall in the latest quarter,
declined comment.
Some industry analysts speculate that the decrease in
satisfaction might be the result of disenchantment with a slew
of unchanged products in a marketplace that has otherwise seen
great technological advances. "It's probably lack of product
innovation," says Amny Low Chasen, of Goldman Sachs.
Among food-processing companies, overall satisfaction
levels were unchanged. But some major corporations, including
RJR Nabisco Holdings, Kellog Co. and Dole Food Co., had
declines of more than 2%. Most notable was Dole's fall from
1994, when it was the highest-scoring firm in the index, with
a core of 90. Since then, its rating has dropped about 11% to
80. This drop was surpassed only by airlines, which fell 12.5%
to 63 from 72 in 1994. The ACSI measures airlines during the
first quarter.
Mr. Fornell notes that Dole's ACSI decline began in 1996,
and since then its stock has been gradually falling and now
trades at half of what it did in 1994. Some analysts note that
Dole, the world's largest banana producer, has expanded its
product offerings in recent years, adding convenience items
such as bagged salads. But the strategy means that Dole now
must compete across a wider range of productes, most of which
are priced higher than bananas.
Dole, based in Westlake Village, Calif., declined to
comment, saying it hadn't seen the survey. Kellogg had no
comment on its decline, while Nestle, which also showed a dip,
declined to comment.
While statistically insignificant, a 1.2% decrease at
General Mills Inc. could possibly be pinned on a change in the
company's Bisquick mix last year. The breakfast-food maker
changed the pancake recipe on the Bisquick box, asking
consumers to add vanilla extract to the mix. A spokeswoman
said the company was responding to customer requests for a mix
that yields lighter, fluffier pancakes. But as soon as the new
packaging rolled out, complaints rolled in and sales dropped.
General Mills recently restored the recipe and is starting
to send the old Bisquick back to supermarkets. "We take very
seriously the comments that come in on our customer service
line," spokeswoman Pam Becker says, adding that the company
hears from customers through letters, phone calls and e-mail.
Another food company, Kraft, also had a slight decrease,
but noted that the change was statistically insignificant. "We
don't see a reason for conern here," says spokeswoman Kathy
Knuth.
Mr. Fornell, the head of the research center, also pointed
out that customer expectations for Kraft rose 2% from a year
earlier, higher than for other companies in the sector. Kraft,
a unit of Philip Morris, is a sponsor of the ACSI. Sponsors
pay a fee to get more detailed data on their products, but
companies don't have to pay to be included in the survey.
Aside from food makers, the only category with overall
unchanged results was casual apparel. Just two major companies
in the index, Liz Claiborne Inc. and VF Wrangler, had
decreases. Liz Claiborne, which had the larger decrease,
wouldn't comment, while Wrangle parent VF Corp. dismissed its
slight decline in the survey.
"Since our corporate name is not strongly associated with
any of our apparel brand names, I don't believe that a decline
in this particular survey is particularly meaningful," says
Cindy Knoebel, a spokeswoman. VF's apparel brands include
Wrangler and Lee jeans, Vanity Fair lingerie and Jantzen
swimwear.
Athletic-shoe makers enjoyed the strongest increase in
customer satisfaction, rising 2.7%. Nike Inc. held steady with
the year-earlier level, while Reebok International Ltd. rose
in customer's views. Other athletic-shoe companies, which
aren't broken out in the survey, saw an overall rise of 3.9%.
Customer satisfaction with pet foods rose 1.2%, led by a
3.6% increase at Colgate-Palmolive, which makes Hill's Pet
Nutrition. The category recently has benefitted from
Americans' devotion to their pets, displayed by the rapid
growth of pet superstores.
Soft-drink makers also saw a 1.2% increase in customer
satisfaction, led by Coca-Cola and other beverage companies.
British-based Cadbury-Schweppes PLC, which owns Dr Pepper,
had a 3.4% decrease but declined to comment on the survey.
Meanwhile, pricing may have played a part in a 1.2% decline
for Pepsi-Cola Co., a unit of PepsiCo Inc. Sales volumes at
the company's beverage business fell 2.5% during the third
quarter, largely as a result of bottlers aggressively raising
prices in late summer and early fall. Coca-Cola also raised
pices, but they came earlier in the year. David
DeCecco, a Pepsi-Cola spokesman, who hadn't seen the
satisfaction survey, was hesitant to comment on the results.
But, he said, "looking at it on the surface, one [percentage]
point seems insignificant."
To create the American Customer
Satisfaction Index , the National Quality
Research Center conducts telephone surveys with 12,500 current
customers of the companies being surveyed that quarter. Each
year, that amounts to about 50,000 customers of products from
175 companies and five government agencies. Sales of the
measured companies constitute 30% to 40% of the U.S. gross
domestic product. Companies are scored on a scale of 0 to 100.
Industry indexes are constructed with company indexes,
weighted by the sales of each company. The national index is
made up of the industry indexes, weighted by their
contribution to GDP. Different sectors are updated each
quarter, so the entire index is updated by sections once each
uear. Customers are quizzed about their expectations and their
perceptions of value and quality in the services they have
purchased; for manufactured goods, quality is broken down into
measures of the product and the service accompanying the
product. These are translated through computer models into
overall customer-satisfaction scores, which are used to
predict customer complaints and customer loyalty.
--- American Customer Satisfaction Index :
Nondurable Goods Industries
The National Quality Research Center annually surveys customers of
175 companies and five government agencies, but each quarter it
updates selected industries. Here are the index scores, out of a
possible 100, for companies that make nondurable goods. A percentage
change for an individual company less than 2% is not statistically
significant.
1999 % Change
Group/Manufacturer Score from 1998
Apparel 79 0
Fruit of the Loom 80 0
All Others 79 0
Sara Lee 78 +1.3
VF (Lee, Wrangler) 78 -1.3
Levi Strauss 76 +1.3
Liz Claiborne 76 -2.6
Athletic shoes 76 +2.7
All Others 79 +3.9
Reebok International 75 +1.4
NIKE 73 0
Beverage/beer 79 -3.7
All Others 81 -2.4
Miller Brewing 81 0
Adolph Coors 78 -7.1
Anheuser-Busch 78 -3.7
Beverage/soft drink 84 +1.2
All Others 86 +6.2
Cadbury Schweppes 85 -3.4
Coca-Cola 84 +2.4
PepsiCo 82 -1.2
Food processing 81 0
Hershey Foods 86 +2.4
H.J. Heinz 85 -1.2
Mars 84 +3.7
Pillsbury 84 +1.2
Kraft USA 83 -1.2
Quaker Oats 83 0
Campbell Soup 81 +1.3
General Mills 81 -1.2
Kellogg 81 -2.4
Nestle, USA 81 -2.4
RJR Nabisco 81 -2.4
Sara Lee 81 +1.3
All Others 80 0
ConAgra 80 0
Dole Food 80 -2.4
Tyson Foods 79 +0.0
Personal care products 81 -1.2
Clorox 84 -1.2
Procter & Gamble 81 -2.4
Unilever United States 81 -2.4
All Others 80 +1.3
Colgate-Palmolive 80 -2.4
Dial Corporation 79 -2.5
Pet foods 82 +1.2
Colgate-Palmolive 86 +3.6
Nestle, USA 84 +1.2
All Others 82 +1.2
Ralston Purina 82 +1.2
H.J. Heinz 81 +1.3
Mars 81 -1.2
Tobacco-cigarettes 76 +1.3
R.J. Reynolds Tobacco 77 +2.7
All Others 76 +2.7
Philip Morris 75 0
Source: The American Customer Satisfaction Index is produced through
a partnership of the University of Michigan Business School, American
Society for Quality, and Arthur Andersen. |
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